| When it comes to benefits from Social Security, | | | | positive rise in the inflation, then a person receives |
| then cost of living adjustment is an important | | | | more money from the Social Security |
| component. This adjustment is also known as | | | | Administration (SSA). The SSA uses a special |
| COLA and it refers to the payment that is | | | | formula to work out the COLA. Basically, the |
| adjusted taking into account the inflation that | | | | current year's third quarter rise in the Consumer |
| exists in that particular year. | | | | Price Index is compared to the previous year's |
| The adjustment is done after doing inflation | | | | Index for the same period. Then that is taken |
| indexing. While the COLA amount may not be | | | | into consideration when calculating the cost of |
| significant each month when the Social Security | | | | living adjustment. |
| benefits are received by the people, in the long | | | | Every year, in October, the SSA announces the |
| run it plays a vital role. For instance, if there is | | | | cost of living adjustment and the amount is then |
| three percent inflation, then a person's income will | | | | paid from December of each year. |
| have to increase eighty percent from the age of | | | | COLA has been the lifeline of many seniors who |
| 65 years to 85 years in order for him or her to | | | | are living on nothing but their Social benefits. This |
| maintain the same living standard as now. | | | | also highlights the importance of saving for |
| The US Congress passed a law in 1973 which | | | | retirement, so that a person gets income from |
| ensured that all Social Security benefits have to | | | | multiple sources other than the Social Security. |
| be indexed for any inflation. Hence, if there is a | | | | |